Repaying student loans

There are 2 general types of student loans:

• Federal. Federal loans are made and regulated by the government. Most student loans are federal. There are limits on the amount of federal loans that you are eligible to receive.
• Private. Private loans are not made by the government and give the borrower fewer federal protections.

The type of loan that you have can impact your repayment options and the protections that are built in if you have trouble paying. Federal loans are the better option for most borrowers.

Restarting federal student loan payments

Federal student loans will start accruing interest again on Sept. 1, 2023, and payments will be due starting in October 2023.

There are several new programs that can help borrowers restarting payments: 

• SAVE Plan. The Savings on a Valuable Education (SAVE) Plan is a new income-driven repayment plan. Payments are based on your earnings and household size, and are readjusted every year. This is a permanent plan that will be available moving forward to all current and future borrowers.
  • Eligibility. Borrowers with federal undergraduate or graduate loans are eligible. Parents who borrowed to pay for their children's education using a Parent PLUS loan are not eligible to enroll in SAVE. 
  • How it helps. The SAVE plan has a few advantages over other income-driven repayment plans. The primary ways it helps borrowers include shielding more income for basic needs, canceling interest that isn't covered by your monthly payment, and cutting payments from 10% to 5% of discretionary income (the payment reduction based on discretionary income will go into effect in July 2024). 
  • How to enroll. If you're already enrolled in the REPAYE income-driven repayment program, you will automatically be enrolled in SAVE. If not, you can sign up online at StudentAid.gov/SAVE; borrowers will be able to see their payment amount before signing up. 
• Temporary on-ramp period. Through September 30, 2024, borrowers will be protected from having a delinquency reported to credit reporting agencies. However, payments are still due, and interest will continue to accrue (add up). The Department of Education will not report you as delinquent during the on-ramp, but they do not control how credit scoring companies factor in missed or delayed payments. Only loans eligible for the payment pause are eligible for on-ramp.

As federal student loan payments restart, remember that you do not have to pay for help with your student loans. Learn more about common student loan scams and how to avoid them below.

Federal loans

There are different federal loans programs including:

• The Direct Loan program. Most newer federal student loans come directly from the government.
• Federal Family Education Loans (FFEL). Many older federal family education loans come from private lenders and are guaranteed by the government.
• Perkins Loan program. Some older federal loans are from participating schools. Currently, there are no new Perkins loans.

The source of your loan determines your repayment options. If you're not sure about the details of your federal student loans, you can look up that information at StudentAid.gov.

If you can't pay federal loans

If you have trouble repaying your loans, you should:

• Contact your loan servicer. Ask about  your repayment plan options and enroll in a plan that lowers your monthly payments, if one is available. Or, ask for deferment or forbearance.
• Enroll in an income-based repayment plan. If you have high student loan debt relative to your income, you could qualify for an income-based repayment plan.
• See if your loan can be canceled. In some circumstances (like if you become totally and permanently disabled) loans can be canceled completely. You can find a list of eligible situations from the Student Loan Borrowers Assistance Project.

Public Service Loan Forgiveness

If you work for the federal, state, local or tribal government, or if you work for a nonprofit organization, you might be eligible for the Public Service Loan Forgiveness (PSLF) program. This program forgives the balance of your federal student loans if all of the following apply:

• You are employed by a U.S. federal, state, local, or tribal government or not-for-profit organization.
• You work full-time for that agency or organization.
• You have Direct Loans (or consolidate other federal student loans into a Direct Loan).
• You repay your loans under an income-driven repayment plan.
• You make 120 qualifying payments.

Learn more about PSLF and how to qualify for the program from StudentAid.gov.

If your loan goes into default

If you miss a scheduled payment, your loan becomes delinquent. Then, if you still do not pay, your loan may go into default. Going into default can cause severe financial, legal, professional and educational problems.

To find out if your loan is in default:

• Contact your loan servicer directly. The best way to check the status of your loan is contacting your loan servicer. To find your servicer’s contact information, log in to StudentAid.gov.
• View the status of your loan at StudentAid.gov. Remember, this website may not update in real time, so the status may be outdated.
• View your credit report. Your credit report lists federal student loan defaults in the negative information section.

If you are in default, you should:

• Ask your loan servicer if you’re eligible to cancel your loan. You may be eligible to cancel the loan completely.
• Ask yourself if you can pay the entire remaining amount of your loan. If you pay the entire remaining amount of your loan, you can get out of default immediately.

Consolidation and rehabilitation

If you cannot cancel or pay the entire loan, there are 2 options for getting out of default:

• Consolidation. Consolidation combines your old loans into a new loan. There are limits on how many times you can consolidate.
• Rehabilitation. Rehabilitation fixes your existing loan. You can get out of default through rehabilitation once per loan only.

You should not take out personal loans (which have high interest rates) to pay student loans.

Consolidation and rehabilitation have advantages and disadvantages. For example, consolidation may be faster, but you may lose some legal rights. Rehabilitation takes longer (almost a year), but is slightly better for your credit report.

The Department of Education usually recommends rehabilitation. But, both rehabilitation and consolidation may be good options. Always ask questions about all available programs and collection fees.

To begin rehabilitation, contact your loan servicer. 

To begin consolidation, complete the Federal Direct Consolidation Loan Application and Promissory Note.

Private student loans

Private student loans do not have the same protections that come with a federal student loan.

If you have trouble making private student loan payments, you should:

• Contact your loan servicer. If you aren't sure who services your loan, you can call your original lender to ask. Your school's financial aid office may also be able to help. If neither of these options work, you can also check your credit report.
• Negotiate a new payment plan. Ask your loan servicer to negotiate a new payment plan.

If you miss private student loan payments

If you miss private loan payments, your lender may take legal action to get the money. Your lender may:

• Sue you. The lender may take you to court to reclaim the money. 
• Garnish your wages. The court may allow the lender to keep money from your paycheck. 

If you have a problem with your lender

If you have problems with a student loan lender, contact one of the ombudsman programs such as:

• Your lender’s ombudsman. Many guaranty agencies and lenders have an ombudsman. To find out if your lender has an ombudsman, ask your lender.
• The U.S. Department of Education Student Loan Ombudsman. For federal loans, you can submit a problem on their website, or contact them by phone or mail.
• The Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman. On their website, you can submit a problem and find more tools to help you understand loan options.

Discharging loans through bankruptcy

To discharge a loan through bankruptcy, you must prove that the loan causes undue hardship. It is difficult to prove undue hardship. So, most people are not eligible to discharge their federal or private loans through bankruptcy.

If you have trouble repaying your loans, you should consider other options besides discharging through bankruptcy.

Avoiding student loan repayment scams

Scammers may offer to help you repay student loans, but they actually want to take your money. Watch out for these common signs of a scam:

• Upfront payment. If a company requires a fee before they help you, it may be a scam. Scammers may ask for your credit card number or bank account information and offer to pay your servicer for you. Free help is available through your federal loan servicer.
• Total immediate loan forgiveness. No one can promise immediate and total loan forgiveness. Government forgiveness programs usually have strict eligibility requirements. Payment amounts are set by federal law and cannot be lowered. Student loan debt relief companies are unable to negotiate a “special deal” for you.
• FSA ID username and password requests. The U.S. Department of Education never asks for your FSA ID password. Scammers may request your FSA ID information so they can change your account without your permission and take your money. Do not give your FSA ID password to anyone. Do not allow anyone to create an FSA ID for you.
• 3^rd party authorization forms and power of attorney. Scammers may ask for legal permission to make decisions for you. Then, scammers may abuse this permission by changing your account and contact information to trick you into thinking they are paying your loan bill when they are not paying the bill.
• Limited-time offers. Scammers may rush you to make decisions by offering “limited-time” offers. Some programs do have real deadlines, but pressure to make a choice quickly is often a red flag for a scam.
• Spelling and grammatical errors. Some scammers send formal letters that look official to trick you. If you notice unusual capitalization, improper grammar or incomplete sentences, the materials are likely a scam that is not from the Department of Education.

The Department of Education announced in July 2023 the first round of loan forgiveness under the IDR account adjustment. This forgiveness is automatic and if you qualify you will be notified by the Department of Education, directly. If you are contacted by a company saying they will help you get forgiveness for a fee, it might be a scam. You never have to pay for help with your federal student aid. Work only with the Department of Education and your loan servicer. 

For more tips on identifying a student loan scam, visit StudentAid.gov.